U.S.-Cuba Trade and Economic Council, Inc. New York, New York Telephone (917) 453-6726 • E-mail: [email protected] Internet: http://www.cubatrade.org • Twitter: @CubaCouncil Facebook: www.facebook.com/uscubatradeandeconomiccouncil LinkedIn: www.linkedin.com/company/u-s--cuba-trade-and-economic-council-inc- Final U.S. Food & Agribusiness Exhibition Report The following information was compiled by the U.S.-Cuba Trade and Economic Council only for use by registered exhibitors, and is not to be distributed to or used by consultants, consultants of exhibitors, or any other party. SECOND U.S. FOOD & AGRIBUSINESS EXHIBITION PLANNED FOR JANUARY 2004- On 8 October 2002, Westport, Connecticut-based PWN Exhibicon International LLC applied to the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., for a license to conduct a second U.S. Food & Agribusiness Exhibition in Havana, Cuba, in January 2004. The government of the Republic of Cuba has already agreed to host a second U.S. Food & Agribusiness Exhibition. PWN Exhibicon International LLC organized the U.S. Food & Agribusiness Exhibition held at the Palacio de Convenciones de la Habana (Pabexpo) in the city of Havana, Republic of Cuba, from 26 September 2002 through 30 September 2002. For additional information about the U.S. Food & Agribusiness Exhibition, please contact: Mr. Peter W. Nathan, PWN Exhibicon International LLC, 4 Greenbrier Lane, Westport, Connecticut 06880; Telephone: (203) 222-8660; Facsimile: (203) 222-8335; e-mail: [email protected]; Internet: http://www.cubaexhibitions.com LEGISLATION FOR AGRICULTURAL MACHINERY AND FARM EQUIPMENT EXPECTED IN 2003- Some Members of the United States Congress are planning to introduce legislation in 2003 that would authorize the cash-only export of agricultural machinery and farm equipment from the United States to the Republic of Cuba. The Honorable George W. Bush, President of the United States, can issue an executive order to authorize the export of agricultural machinery and farm equipment from the United States to the Republic of Cuba. The legislation would be similar to the Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000, which re-authorized the direct commercial (on a cash basis only) export of food products and agricultural products from the United States to the Republic of Cuba, irrespective of purpose. The TSRA authorizes foreign subsidiaries (not branches) of United States-based financial institutions to provide financing for exports to the Republic of Cuba and authorizes non-United States-based financial institutions to provide financing for exports to the Republic of Cuba. The legislation would also need to specifically authorize travel to the Republic of Cuba for the pupose of marketing agricultural machinery and farm equipment, as provisions of the TSRA restrict the current categories for travel to the Republic of Cuba. LEGISLATION TO REPEAL SECTION 1706(a)(1) OF THE CDA CONSIDERED FOR 2003- Some Members of the United States Congress are considering introducing legislation in 2003 that would repeal Section 1706(a)(1) of the Cuban Democracy Act (CDA) of 1992, 101 Stat. 2575. This provision “prohibits the issuance of licenses authorizing U.S.-owned or controlled foreign firms to engage in transactions related to the exportation to Cuba of commodities produced outside of the United States.” 1 According to the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., “In the mid-1970’s, Section 515.559 was added to the Regulations to allow OFAC to license foreign subsidiaries of U.S. firms to conduct trade in commodities with Cuba so long as several specific criteria were met.” “Section 1706(a) of the CDA, however, prohibits the issuance of a license that would have been issued pursuant to Section 515.559, except where a contract was entered into prior to enactment of the CDA or where the exports at issue are medicines or medical supplies.” In 2001, pursuant to § 515.533, the OFAC amended the “Note to Section 515.559 to make clear that U.S.- owned or controlled foreign firms may, however, be authorized to engage in the reexport of U.S.-origin items to Cuba.” Otherwise, the provisions of § 515.559 remain unchanged. Section 1706(a)(1) is relevant to the implementation of the Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000, which re-authorized the direct commercial (on a cash basis only) export of food products and agricultural products from the United States to the Republic of Cuba, irrespective of purpose. During the U.S. Food & Agribusiness Exhibition held at the Palacio de Convenciones de la Habana (Pabexpo) in the city of Havana, Republic of Cuba, from 26 September 2002 through 30 September 2002, some Republic of Cuba-based entities requested to purchase branded food products that are manufactured in Mexico, Costa Rica, Brazil, Colombia, Chile, Canada, and Argentina by wholly-owned subsidiaries of United States-based companies. The non-United States-produced products (beverages, baby food, snack foods, condiments, soups, etc.) have 1) United States brand labels in the Spanish language and 2) ingredients, specifically nutritional supplements and flavorings that are not marketed within the United States. Section 1706(a)(1) requires that the Bureau of Industry and Security (BIS) of the United States Department of Commerce in Washington, D.C., and the OFAC deny a license to a United States-based company for the purpose of exporting to the Republic of Cuba a non-United States-produced food product or agricultural product. Since Section 1706(a)(1) references “commodities,” the BIS and the OFAC may be able to supplant Section 1706(a)(1) for the export from third countries of United States-branded food products not defined as “commodities” and not necessarily having United States-origin content. LEGISLATION TO REPEAL SECTION 1706(b)(1) OF THE CDA CONSIDERED FOR 2003- Some Members of the United States Congress are considering introducing legislation in 2003 that would repeal Section 1706(b)(1) of the Cuban Democracy Act (CDA) of 1992, 101 Stat. 2575. Section 1706(b)(1) includes the following provisions: “(1) Vessels engaging in trade. Beginning on the 61st day after the date of the enactment of this Act [enacted Oct. 23, 1992], a vessel which enters a port or place in Cuba to engage in the trade of goods or services may not, within 180 days after departure from such port or place in Cuba, load or unload any freight at any place in the United States, except pursuant to a license issued by the Secretary of the Treasury. (2) Vessels carrying goods or passengers to or from Cuba. Except as specifically authorized by the Secretary of the Treasury, a vessel carrying goods or passengers to or from Cuba or carrying goods in which Cuba or a Cuban national has any interest may not enter a United States port. (3) Inapplicability of ship stores general license. No commodities which may be exports under a general license described in section 771.9 of title 15, Code of Federal Regulations, as in effect on May 1, 1992, may be exported under a general license to any vessel carrying goods or passengers to or from Cuba or carrying goods in which Cuba or a Cuban national has an interest.” Section 1706(b)(1) is relevant to the implementation of the Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000, which re-authorized the direct commercial (on a cash basis only) export of food products and agricultural products from the United States to the Republic of Cuba, irrespective of purpose. The TSRA did not rescind Section 1706(b)(1), thus United States-based companies and non-United States-based companies must request a license from the Bureau of Industry and Security (BIS) of the United States Department of Commerce in Washington, D.C., for vessel contents (including crew provisions), a process that can be 45 days. 2 FOCUS UPON TSRA PAYMENT TERMS AND FINANCING PROVISION BEING REVIEWED- At the request of some representatives of United States-based companies, some members of the United States Congress have been asked to reconsider, at this time, efforts to alter payment provisions of the Sanctions Reform and Export Enhancement Act (TSRA) of 2000, which re-authorized the direct commercial (on a cash basis only) export of food products and agricultural products from the United States to the Republic of Cuba, irrespective of purpose. Given the chronic difficulties by Republic of Cuba government-operated entities in meeting their commercial debt obligations, some representatives of United States-based companies have expressed increasing concern that any immediate change to provisions of the TSRA to a) authorize United States- based companies to provide payment terms- 30 days, 60 days, 90 days; discounts for early payments (2% net 10 days; 2% net 30 days), etc., and b) authorize United States-based financial institutions to lend funds to Republic of Cuba government-operated entities, could result in unintended consequences. Despite the intentions of a Republic of Cuba government-operated entity to comply with payment terms (company) or lending terms (financial institutions), there will likely be a reported default given the government of the Republic of Cuba’s chronic shortage of foreign exchange. Such a report in the public domain would most certainly result in efforts by members of the United States Congress to re-legislate the TSRA in a more unattractive manner to United States-based companies and would result in a substantial lessening of commercial interest toward the Republic of Cuba. Due to provisions of the TSRA, Republic of Cuba government-operated entities have become one of the safest export markets in the world for United States-based companies, as “cash-only” transactions are, by definition, fundamentally without risk.